Blue Owl's Kurt Tenenbaum on financing the AI compute build-out and the IREN deal

Speaker 1: Whether you're writing code, analyzing data, creating content, automating business workflows, Codex helps you move projects forward from start to finish. Our next guest is from Blue Owl Capital. We have senior director Kurt Tenenbaum. Sorry to keep you waiting Kurt. Thank you so much for joining the show. How are you?

Speaker 13: No no worries. Well, know, you had to you had to finish with Nikesh there and give him a hard time about all the all the birdies he's been getting. So I appreciate that. Appreciate that.

Speaker 1: He's a fantastic golfer. Since it's the first time on the show, would love to know a little bit about your focus within the organization and and then I want to go into the the latest deal with Iron but also a little bit of the lineage of this business that Blue Owl's built up. We've seen we like, we've covered the company so much on the show, but I think you're the first person from the organization to join. So very excited to talk to you.

Speaker 13: Yes. And excited to talk to you, Jordan and John. Big big fan

Speaker 8: of the show.

Speaker 13: And thanks for thanks for having thanks for having me on.

Speaker 4: So Awesome.

Speaker 13: Yes. I I at Blue Owl, I focus on our AI compute infrastructure business. And so what that means is we have a big robust data center investing practice. We own over a 100 data centers across the world, about ten ten gigawatts worth of compute. Wow.

Speaker 1: There you

Speaker 13: go. And and but however, that business is really focused on kind of building the underlying data centers. My team is everything that goes in. And so as you guys know well, you spend $25 on a data center, you have to spend $75 on a chip Yeah. On the chips that go inside every five years. And so that's what we're really excited about, figuring out ways to partner, figuring out ways to finance that piece of the build out. What's interesting for us because Blue Owl is a diversified asset manager across a bunch of different strategies is we really get to bring the excellence attached to our data center investing business, our direct lending business where we really got our start, as well as our leasing business and bring the combination of all three of those together to be able to provide solutions like Iron, which we're excited to talk to you about Yeah. To to market that we think are differentiated versus many of our other peers.

Speaker 1: Every time I see private credit and data center build out in the news, it's always this discussion about GPU depreciation. Is that an overwrought discussion? Do you feel like you have a stronger feel on that now? We obviously, we've seen a lot of incredibly positive news around depreciation with even a one hundreds getting really high utilization rates long into their life.

Speaker 4: Yeah. That was sort of

Speaker 1: the That that was the fun.

Speaker 4: Primary takeaway from from CoreWeave's Yep. Last earnings call Yep. Was just that they, you know, have these old GPUs that are that are that are gonna be generating revenue well into Yeah. The the

Speaker 1: But I'm curious like is is GPU depreciation actually top of mind for you or is it is it something that you feel like is pretty well understood, pretty solved?

Speaker 13: Yeah. It it's it's a good it's a good question. And listen, the core we have data point is quite notable and something, you know, we and the rest of the market obviously took took took note of. But at Blue Owl, we we don't pretend to have a crystal ball on depreciation or forward rates for GPU levels. Obviously, we're very bullish on them in general, but the way we've invested here is really focused on keeping the duration of the investment we're making relatively short. That matches the underlying contracts that we have with some of the AI natives that we are financing, and we're excited about talking about that piece of it as well. And then underwriting Irene as a investor and getting comfortable there. And so it's it's not we are not just hanging our investment on forward depreciation rates for GPUs, although it's something we're obviously very focused on and spending time around.

Speaker 1: What does the current landscape for these types of deals look like? Because we see hyperscalers, sometimes NVIDIA directly doing something that looks a little bit like equipment financing. And I'm wondering if the shape is like, are you competing with people outside of the private credit world at this point? How big is the pool of capital that the data center constructors and operators are actually going after?

Speaker 13: Yeah. I I think this is a moment in time where everyone is gonna have to be invested across the landscape to get to the type of capital needs that we we need. I I actually think at some point, capital may become the limiter or at least one of the limiters attached to it. We're seeing the investment grade market finance chip compute actually quite efficiently, but there's a lot of demand for that. And that demand will continue and will continue to escalate. And so the part of the market we're really focused on is the noninvestment grade piece where we think it's a lot harder to get that type of financing. We're able, in the case of IREN, to finance the AI natives, which is a particular pain point and pinch point in the market. And and that's that's where our focus is that's where our focus has really been.

Speaker 4: Yeah. Got it. What are you seeing on the actual data center operator side? And what are the smart players doing to overcome sort of local regulatory hurdles? You know, we've heard there's there's a bunch of ideas being thrown around right now. How do you get a local community really bought in? There's the tax revenue component. Some some individuals are gonna be excited about that. Others may be more excited about direct payments. But what are you seeing across the landscape of what's working to actually get projects from the sort of concept stage to powered shell GPUs, you know, actually running.

Speaker 13: Yeah. Listen. That's been a huge focus of the market and of the media recently. I'm not sure I have the exact answer to that as we sit here today, but it's something we as an organization are spending a tremendous amount of time around. And, listen, we really need to engage all the constituents around the table to to get to a solution that, you know, works for AI infrastructure as well as works for, the investors and the operators who are involved as part of that.

Speaker 1: And and most of the time for, I imagine, for equipment financing deals, the powered shell is already up and running. And so, a lot of those concessions, if they need to be made, have already been made. Is that is that roughly right?

Speaker 13: Yeah. That's exactly right. One of the things we like about it is when we fund into these transactions, the compute is basically on the come within a couple weeks. And so that is all that portion of the business is already up and running, and we get to finance very close to where the revenues are actually happening.

Speaker 1: Yeah. And it might also be the case that there is an existing power shell or data center, and they're just upgrading to or something like that and that's where you come in. Is that is that Yeah. Post retrofit. That's exactly Yeah. Post retrofit. Yeah. That makes sense. Well, congratulations on the Iron deal. Thank you so much for coming on the show.

Speaker 4: Yeah. Come back on as you have more.

Speaker 1: Yeah. We'd love to talk

Speaker 8: Thanks to

Speaker 13: for having me guys. Take care. Have a great

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